The company said it was a year in which it completed a transformational acquisition which expanded its branded foods portfolio, increased its exposure to and gained market share in growth categories and added to its consumer goods supply chain and organizational capability.
Bega Cheese generated normalized earnings before interest, depreciation and tax (EBITDA) of A$141.7m (US$103.5m) in FY2021, 38% higher than the prior year and sales revenue of A$2.07bn (US$1.5bn), with a net debt of A$324.9m (US$237.2m) and an adjusted net debt/normalized EBITDA leverage ratio of 2.25.
Reflecting on the result, executive chairman Barry Irvin said, “The importance of consistent strategy and strong values is never more evident than in times of uncertainty. Our capacity to be agile and change, while remaining confident in the core direction and strategy was again tested and on display in FY2021 as we executed the acquisition of Lion Dairy and Drinks. We continue to adapt our business to operate in a Covid-19 safe manner and respond to changing customer and supplier requirements.”
The A$528m (US$385.5m) acquisition of Lion Dairy and Drinks, mostly funded by a A$393m (US$287m) net capital raise, saw Bega Cheese more than double in size in terms of both annualized revenue to approximately A$3bn (US$2.2bn), and employees to more than 4,000, expand its cold chain distribution network to now be one of the largest in the country, and increase its proportion of sales from branded products from 59% to in excess of 80%.
“Our people have, over the past year, continued to respond with agility, passion and dedication to the needs of customers, the community and the business, developing innovative solutions to new challenges and ensuring that our much-loved iconic branded products continued to reach both supermarket shelves and the hands of consumers – despite the challenges of the COVID-19 pandemic,” Irvin said.
In addition to the acquisition of Lion Dairy and Drinks, Bega Cheese completed and implemented the recommendations of an operational review, concluded two long-running legal disputes, responded to the termination of service and access arrangements at the nutritional powder and canning facility in Derrimut and expanded its branded product offering in growth categories with new product launches.
Bega Cheese experienced a softening in demand for infant formula during the year due to changes in the Chinese market created by shifts in customer preferences and a weakened Diagou channel. This drop in demand was recognized by the business and mitigating initiatives have been implemented to reduce the financial impact whilst still retaining the capability to service customers in the future.
Bega Cheese had consolidated debt of A$325m (US$237.4m) as of June 30, 2021, compared to A$231m (US$168.7m) on June 30, 2020. The movement in net debt arose mainly from A$125m (US$91.3m) of net proceeds from borrowings to partially fund the acquisition of Lion Dairy and Drinks, capital and software investment. The increase was offset by operating cash inflows of A$111.4m (US$81.4m).
Bega Cheese reduced its normalized EBITDA to net debt leverage ratio from 2.35 times to 2.25 times, within year-end bank covenants of 3.0 times, and expects its leverage ratio to continue to trend favorably throughout FY2022.
Bega Cheese announced a final fully franked dividend of 5.0 cents per share for FY2021, taking the total dividend for the year to 10.0 cents per share amounting to A$30.2m (US$22.1m), which compares to 10.0 cents per share and A$21.4m (US$15.6m) for FY2020.
Bega Cheese said it will continue to focus on cash management throughout FY2021 having regard to its planned capital expenditure program and objective of further debt reduction.
Following a year of transformational change in FY2021, Bega Cheese said it will continue to focus on unlocking value through growth of the combined complementary portfolios of branded products in domestic and export markets, by achieving costs synergy benefits from the Lion Dairy and Drinks acquisition in the year ahead, and carefully manage the supply of milk which is set to remain competitive through FY2022.
CEO Paul van Heerwaarden said, “Strategic acquisition, product innovation and disciplined capital management have over the past year accelerated our progress towards the goal of becoming the Great Australian Food Company. Investment in our people, products, processes, communities and supplier relationships will bring us even closer to achieving that vision as we continue to develop a business for the future, whilst navigating the challenges of today.”
